Corrs High Vis: Episode 26 – Murray Report reviewing the national security of payment laws

Megan Sharkey, Lawyer, Corrs Chambers Westgarth
Andrew McCormack, Partner, Corrs Chambers Westgarth
Sam Woff Senior Associate, Corrs Chambers Westgarth
Wayne Jocic, Consultant, Corrs Chambers Westgarth

Megan: We are here today to discuss the recently released review of security of payment laws. The Commonwealth Government engaged a Member of the Order of Australia, John Murray, to review security of payment legislation across Australia. In doing so, Mr Murray met more than 70 stakeholders. The result is an exhaustive report that’s just shy of 400 pages long.

I am Megan Sharkey, a lawyer in the Construction Team here at Corrs and I am here with Partner, Andrew McCormack, Senior Associate, Sam Woff and Consultant, Wayne Jocic. We’ll be discussing some of the most important recommendations and debating their effect on the construction industry.

Wayne, perhaps you could start by giving your overall impressions of the report.

Wayne: Thanks I am glad that you’re asking for overall impressions and not a commentary on all the 86 recommendations. I don’t think that would be good for anyone. There is one recommendation though that everyone needs to know. So the overarching recommendation that Mr Murray makes is that the legislation be harmonised. So essentially there be the same legislation across the jurisdictions and that it follow broadly the east coast model and in particular most of the recommendations suggest following something like the current form of the New South Wales legislation. So that’s really their headline finding – headline recommendation and that’s the one we need to know about.

There are lots of small improvements, mostly fairly uncontroversial ones. I think Sam is going to talk about some of those a bit later. But of course this is a really difficult process and Mr Murray has managed that very well. He’s had to make some compromises here and there. In some cases there’s some doubling up. You have, for example, roles still for authorised nominating authorities plus a government regulator. You have the possibility of seeking a review of adjudications and also still the potential for judicial review where there has been a jurisdictional error. So there are still some complexities but essentially what Mr Murray has done is really to handle a terribly difficult task, quite well.

Megan: one of the concerns about the security of payment legislation is of course, its complexity. Sam, what has the review recommended to tackle this problem?

Sam: Thanks Megan. Yes the review tackles this problem kind of at two levels: at a macro level as we’ve heard from Wayne, there’s going to be an attempt to harmonise all the various jurisdictions into one national scheme which can only assist in reducing the complexity. Quite a lot of the complexity at present is tied up in the fact that you have different legislative schemes in different States. So the effort to bring that together into one harmonised approach, can only be a good thing.

At a more micro level, there’s some more spring cleaning which has been done to get rid some of the dusty corners of the existing legislation. Some things are completely done away with where they don’t serve a proper purpose. For instance, the Victorian excluded amounts regime has been done away with; the concept of reference dates has been recommended to be abolished; and we’re going to get a consistent national uniform Christmas shut down period where the timeframes in the acts don’t apply. So some appropriate spring cleaning there.

There are a couple of areas where perhaps Mr Murray on my reading might have been a bit over zealous in terms of trying to simplify things. Sometimes that appears to have come at the cost of potentially some fairness in the effort to sort of achieve a more simplified process. Some of the protections particularly to the respondent, appear to have been done away with. But I know Andrew you wanted to talk about that a little bit more, so I won’t say anything further about it.

Megan: Andrew, I know there’s a comment you wanted to make in relation to the recommendation that the dual track system in Queensland not be adopted in any national reforms. Do you think that the report strikes the right balance between fairness and simplicity?

Andrew: Well thanks Megan. I think the answer to the question is, and maybe I am bias being from Queensland, but it is probably not the report is recommending a one size fits all approach to security of payment and I am not sure that always produces the right outcome. So to put in a very stark example, you would have the same process and the same timeframes to respond to an SOP claim for say, a $1000 as you would if the claimed amount was $100 million and typically in the latter case the volume of material and the complexity of the arguments and issues will be far more significant in a large value claim. That being the case I think that the system that Queensland introduced, although that has been paired back somewhat by the recently introduced Building Industry Fairness Act. But in Queensland we still do have a two tier system, a standard payment claim which is anything $750,000 or less and then above $750,000 you have got complex payment claims and there is a longer time period to respond each step in the adjudication process has a longer time and ability to have extensions and that allows a better and more considered response and a better and more considered adjudicators view on the point. So I think that actually the balance between fairness and simplicity isn’t quite right and there will be some room for what is affectionally known as the ‘dual track system’.

Megan: The role of the adjudicator is one central topic we haven’t fully discussed yet. Sam what does Mr Murray recommend in respect of adjudicators?

Sam: Thanks Megan. Yes Mr Murray does make several recommendations in relation to adjudicators. Mainly to improve perception as to their quality and to remove lingering doubts as to their neutrality in relation to deciding their disputes. Firstly, there is a recommendation that adjudicators be more heavily regulated in that they have to be registered with a authority, they have to undergo training, and they have to be graded, and secondly, there’s some suggestions in the report that adjudicators be nominated through a more impartial process. Whether that’s by the parties nominating the adjudicator equally or whether there is some yet to be determined authority that actually makes the appointment and I think in that Mr Murray is trying to move away from the current model. In some of the states where really it comes down to one of the parties quite often the claimant to make the nomination for who the adjudicator is going to be. So I think that those are all positives steps in the right direction because it’s going to increase the quality of the decisions from the adjudicators and also improve perceptions that they are unbiased and that can only be a good thing for the whole procedure.

Megan: Andrew if I can come back to you. Are there any elements of the proposed recommendations which you think would be particularly welcome?

Andrew: Yes I came across some more poo pooing the report earlier on when I was talking about the dual track system. But there are some recommendations that are to be applauded in my view. One of them is to ethnicate in New South Wales and now Queensland, is to reintroduce the requirement to identify a payment claim as being a claim under the legislation in order to bring the payment claim under the structure of the legislation. I would say in New South Wales it’s been the case for the past few years and it will be case shortly in Queensland, that you don’t need to identify your payment claim as one being made under the Act if it satisfies a very liberal definition of what a payment claim is, the statutory regime and statutory timeframes and importantly the statutory consequences of not meeting those timeframes will apply. This means that under those eastern jurisdictions at the moment every claim for payment under a construction contract is a security of payment claim which means as a principle or a head contractor dealing with multiple subcontractor payment claims you have to treat every payment claim as a live grenade. I would suggest that taking the step of actually wanting to bring yourself under the jurisdiction of the Act is not a tremendous amount to ask but could actually be very useful for the relationship between contractors and their clients. Another positive development which is instigated in New South Wales at the present time, not in Queensland, is the requirement to have a supporting statement confirming that you have paid all of your subcontractors included as part of your payment claim. I think that’s a very good idea. It means that there is a degree of rigor required when putting the payment claim together and it helps promote the right behaviours which are to ensure that subcontractors’ payments are properly made and are included in the payment claims that are being submitted up the contractual chain.

Megan: So Wayne. Now we know a little about the report. The next question is – when will it be implemented?

Wayne: Well that’s not an easy question and frankly we don’t know the answer to that. So where we are now is that we have a shiny fancy new report, but there are a couple of challenges. One of those challenges is that the Government hasn’t yet endorsed all or any of these recommendations. So we don’t quite know what the Government’s position is and I am sure we will find out soon. The second issue is more of a technical challenge, and that’s working out how we would actually implement this harmonised legislation. So a couple of ways you could do it. You could find the Commonwealth essentially going it alone relying on its corporations power under the Constitution. The only problem is that not every party involved on a construction project is a corporation and so there will be some gaps. Maybe those parties won’t be properly regulated, maybe they will be regulated under existing State legislation. Doesn’t seem a perfect solution. A better way of doing it would be if the States and Territories in some way agreed. And if they can agree there are some in one or other technical ways of ensuring that we have the same legislation but that does require all those jurisdictions to agree and we don’t yet know whether that will be the case. So what is that moment is – we have an exciting report, a promising report, and we need to see what happens with it, how the report is actually going to be implemented, and it may well be that we will be making some more podcasts along the way.

Megan: I think this nicely rounds up the review of security of payment laws. Thank you Andrew, Sam and Wayne for taking us through the review and thank you to our listeners for tuning in. Until our next High Vis Podcast - goodbye.

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